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Significant Increases in Socially Responsible Investing

The Forum for Sustainable and Responsible Investment has released a report highlighting a notable increase in socially responsible investing (SRI) in 2012. They found that SRI has increased from $639 billion in 1995 to $3.744 trillion in 2012, a 376% increase in the last 17 years and a 20% increase since 2010. Additionally, the number of funds with institutional investors and money managers who incorporate environmental, social, and governance (ESG) factors into portfolio management has increased 46% in just the last two years and now constitutes a third of the SRI capital pool. From a shareholder perspective, this trend manifests primarily in the form of shareholder resolutions asking for companies to evaluate ESG factors for risks and opportunities. These shareholder resolutions range from climate change policy and reporting, to divestment demands based on human rights violations or other factors, to a call for greater transparency in executive pay and political contributions.  Businesses, in turn, are becoming increasingly responsive to the ESG interests of investors. More and more companies are both addressing ESG risks and opportunities in their business planning and reporting, and investing in projects and companies that do the same.

What does this mean for smaller and medium enterprises (SMEs)? Shareholder pressures on larger companies include demands that those companies wield their buying power by pushing demands to incorporate ESG factors throughout their value chains. Therefore, it is expected that this increased attention to ESG factors will begin to more broadly affect all types of companies, from SMEs to large, publicly-traded companies.

The Forum for Sustainable and Responsible Investment (formerly known as the Social Investment Forum or US SIF) has made an Executive Summary of their report publicly available; see http://ussif.org/resources/pubs/documents/USSIFTrends2012ES.pdf (last accessed 12/12/12).  For an informative follow-up article on increased SRI investing, see nbs.net/how-investors-changed-microsofts-reporting-and-why-all-companies-should-care (last accessed 12/12/12).